No shift from MPC in face of euro woes

 
Tim Wallace
Follow Tim
INTEREST rates and the asset purchase programme (QE2) were both held steady in yesterday’s Bank of England Monetary Policy Committee (MPC) meeting.

October’s meeting saw the MPC expand its asset purchase programme by £75bn in an effort to boost the economy in the face of a worsening European outlook.

Governor Mervyn King (pictured, right) had delayed the further easing because the picture had not yet become clear in previous meetings.

Despite the Eurozone crisis continuing to worsen, no more action was taken yesterday.

However, analysts believe a further loosening will be announced in the near future as the picture gets gloomier.

Further expansions of quantitative easing now look highly likely over the coming months as policymakers desperately try to prevent a fall back into economic contraction,” said Scott Corfe, senior economist at the Centre for Economics and Business Research.

“We expect consumer price inflation to fall back sharply come January 2012 as the effects of this year’s VAT rise drop out of the year-on-year price comparison. An economic slowdown in the developed world will also curtail commodity price inflation, bearing down on price growth in essentials such as food,” he said.

“In this light, the Bank of England should focus on bolstering growth rather than hitting its inflation target in the shorter term.”